What Is an 'Unlawful deduction of wages'?

An unlawful deduction of wages occurs when an employee has been paid less than what they were entitled to, or they have not been paid at all.

Can It Be Lawful?

There are three scenarios where the deduction of wages will be lawful:

  • Where it is required by legislation (e.g. tax and National Insurance deductions);
  • Where is it contractually authorised (e.g. to repay a travel loan provided to the employee);

Who can make a claim?

Unlawful deductions apply to all workers, not just employees.

There is no qualifying length of service required to bring an unlawful deduction of wages tribunal claim.

What Counts As Wages For An Unlawful Deduction Claim?

The full definition of what constitutes wages can be found in the Employment Right’s Act 1996. Wages include:

  • Salary, bonuses and commissions whether contractual or otherwise
  • Any statutory payments such as sick pay, paternity and maternity pay, adoption pay and shared parental leave pay.

Regarding bonuses, they must be easily measurable for a claim to be successful for example set target bonuses.

If the sum cannot be calculated using a simple formula, then an employee will have to pursue a remedy for breach of contract, and not for unlawful wage deductions.

Some payments are specifically excluded from unlawful deduction claims:

  • Wage advances or loans are taken from the employer;
  • Any expenses incurred during the course of employment;
  • Any payment made under a pension scheme;
  • Any payments made in relation to an employee’s redundancy;
  • Any payments made in any other capacity other than their capacity as an employee.

Although an employee may not be able to claim for these under unlawful deductions of wages, they may be able to claim for breach of contract.

However, they would need to prove that they are contractually entitled to these additional payments.

How long does an employee have to bring a claim?

An employee who wants to bring a claim for unlawful deduction of wages should do so via an Employment Tribunal if they are bringing a claim after their employment has ended.

The claim must be brought within 3 months, less one day from the last unlawful wage deduction.

If an employee chooses to seek a remedy in the civil courts, then they have 6 years to do so.

Any claims for wages must be for a specified sum.

If there is ambiguity about the amount of money due, then the claim cannot be made into the Employment Tribunal, and instead, a civil remedy will have to be pursued.

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About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.